It sounds crazy, right? Starting in August or September to plan for things you won’t buy for months? But these days with pennies being pinched as tight as they are, planning ahead is the best thing you can do! Listen to financial expert Mike Brescione and get some expert advice to help you prepare for the most wonderful, and expensive, time of the year!

How long will it be before you’re paying for purchases with a simple swipe or “bump” of your iPhone, or other mobile device? Experts say, not long!

The concept of credit has been around for centuries. Starting in the early 1800s, local merchants allowed trusted customers to make purchases without paying the total cost upfront. This intuitive concept allowed sellers to reach a larger base of customers who could then pay their debt over time. As the Internet emerged as a global marketplace where people can purchase goods and services without ever leaving their homes, the credit card, with its snazzy designs and black stripe on the back, has become outmoded.

Today’s savvy consumer expects a different experience, and the bottom line is the credit card wasn’t designed with the Internet in mind (and certainly not with an Internet-connected mobile device). Using a credit card to complete an online transaction is riddled with functional deficiencies. One of the most basic examples: we can all agree that it’s downright painful to have to repeatedly type in your credit card number and security code every time you go to make a purchase online, right? And from a merchant’s perspective, the cost of accepting credit cards — and the associated hidden fees — can make accepting payments online prohibitively expensive. Clearly it’s easy to see why credit-based products that were designed from the beginning for the online experience are rapidly gaining market share.

When it comes to mobile commerce the differences between credit cards and alternative payment methods are even more pronounced. Sure, a little device that allows you to take credit card transactions via a mobile phone is nice, but it’s far from revolutionary. Meanwhile, so-called alternative payment providers with their digitized, multicurrency networks are enabling consumers to transact by simply swiping a mobile device or even bumping mobile phones together. This is the notion of the “mobile wallet” starting to be realized.

The mobile device holds the key to the future of payments, for both consumers and merchants, because it blurs the lines between online and offline. Many predict it won’t be long before the credit card will be the alternative payment method and services that were designed for the online experience from the start will become the norm.

(Excerpts from an article by Bill Zielke; senior director of Merchant Services at PayPal, which recently announced the initial rollout of Mobile Express Checkout. Bill is responsible for the development and marketing of product strategies related to PayPal, and for counseling merchants with product recommendations.)

Last Friday night the Standard & Poor’s credit rating service lowered the U.S. government’s credit rating from AAA to AA+. This means there are about 18 other countries with a higher credit rating than the U.S., including France, Switzerland, Austria and the United Kingdom.

For decades the U.S. has not only been AAA-rated, it’s been considered the highest-rated of the AAA countries. Now, from a credit rating perspective, we lag behind countries like the UK and France, which have their own set of financial problems.

Here’s what all this means from a practical point of view. The U.S. has been like a household with a perfect 850 credit score. Now, because our “debt to available credit” limit is so high, our credit score has been cut. This means it may be a little tougher to borrow money, and those loans may come at higher interest rates.

What does this mean for you, the consumer?

Theoretically, it should mean higher interest rates for everything you need to finance. Because if a near-perfect borrower like the federal government, which has its own money printing press and the ability to boost revenue by raising taxes, will be charged higher interest rates, every other borrower in the world is going to see its rates jump too — from corporations to city governments to credit card users. But that’s not a certain outcome. Japan’s credit rating was lowered from AAA in 1998, and its interest rates are lower today than before the downgrade.

What about the stock market?

There are two recent examples I can point to — Japan and Canada. When Japan lost its perfect credit rating, its market was up 15 percent a year later. Canada was downgraded in1993, and its stock market was up 25 percent a year later.

What about our government?

S&P made it clear that the bickering and last-minute deal-making between the political parties in Washington was one reason for the downgrade. The other reason: spending cuts were not deep enough and revenue increases (i.e. tax hikes) were not included in the deal.

This means that the conversation about balancing the federal budget is just beginning. Both Democrats and Republicans must give up more ground in this debate. That means deeper spending reductions and changes in the tax code in the coming years. After being stripped of its AAA rating in 1993, Canada was fully restored to AAA by 2002 thanks to steep budget cuts and increases in tax revenue. The country is now considered to have the best credit in the world.

The S&P downgrade is troubling news, and financial markets today will undoubtedly be extremely volatile. It also doesn’t help that last week the Dow lost nearly 700 points. But after the initial shock, the market will at some point return to focusing on the fundamentals of what companies earn. And, based on the August earnings reports, those are hovering near an all-time high.

You may say that you would never hand your credit card over to a stranger and let them walk away but do you realize that every time you hand your credit card over to your waiter or waitress you’re doing just that. There’s implied safety because you’re at a legitimate restaurant but you need to realize that your server very well may be a crook.

The same thing applies to anyone you hand your credit card to, a cab driver, a department store employee, a bartender, anyone.

You’ve probably heard about skimming but I’m writing about it because the problem is getting worse and there’s probably a lot on the subject that you don’t know that could create opportunities for thieves.

Skimming is when someone steals the credit card information while you are making a legitimate transaction. It is typically an “inside job” by a dishonest employee of a legitimate merchant. The thief uses a small electronic device, called a skimmer, to swipe and store hundreds of credit card numbers.

Once they download the information onto their computer, they can sell the information on black-market forums; they can purchase things online, or even create new credit cards with your information using blank credit card stock and a credit card encoder.

The crook may have the skimmer attached to the belt around their waist, or lay it next to the cash register and then swipe your card twice, once thru the skimmer and once thru the stores computer system.

Restaurants are high risk because you hand your credit card over to your server and let them walk away with it. The skimming device is very small and fits in the palm of their hand, or it can be in their sock, or even their apron. It’s quick and easy for the server to skim your card and collect the data needed. If they’re working with a partner, they can even skim your card, have it duplicated, and start using the card to make purchases all before you’ve even left the restaurant.

When you pay with a card in Europe, they use pay at the table transaction devices where they bring the apparatus to your table so that your card is never out of your site. For our safety, American restaurants need to start doing the same thing. The portable devices are available, we just need them to start using them.

You may think that using an ATM would be safe but, ATM and debit-card fraud is the top area of concern for banks all over the world. Privately owned ATM’s are the highest risk because a skimming device can easily be added inside the ATM where you can’t see it. Or if the ATM is in an obscure place it can be easily tampered with. But even your bank ATM is a risk because crooks add fake card readers, or skimmers, over the real card-entry slot. When you put your card in the slot it first goes through the skimmer, where the information is collected. Then they either use a pinhole camera or they attach a keypad overlay to record your PIN number. To protect yourself, don’t use ATMs. However, if have to use an ATM then be sure to use your banks ATM machine, check to be sure that a fake card reader or keypad overlay hasn’t been attached, and cover the keypad as you enter your PIN.

Gas pumps are notorious for skimming because they use a universal key allowing thieves to insert a skimming device inside the pump where it can’t be seen. It’s a big problem everywhere but in a Northern Florida county and also in West Covina, California local law-enforcement officials suggested consumers use only cash to pay for gas after skimming attacks at gas stations surged. To protect yourself, pay with cash. If you have to use a card then be sure it’s a credit card and not your debit card.

The national craft store chain “Michael’s” was victim to a recent debit-card skimming scheme where thieves managed to hack the debit-processing equipment at 80 locations in 20 states. They were able to instantly duplicate customers’ cards and begin making cash withdrawals. The chain won’t give details on how it happened but they replaced all of their debit-processing equipment so it appears that the skimming device was added to the inside of the equipment where it wasn’t detectable.

Credit and debit card skimming is getting much worse here in the United States. Currently, you have a one-in-five chance of being a victim, and this trend is continuing up because there is a migration of fraud from Europe here to the US.

Most countries have converted, or they’re in the process of converting, to using smart cards. They don’t use magnetic-stripe technology on the back of the cards anymore like we do. Instead, they use a card that relies on an embedded micro-chip for the storage of data.

Now that the cards in Europe are protected, criminals are increasingly targeting U.S. cardholders. Although all types of cards are at risk, crooks more often target debit card holders.

Credit-card thieves use your card to purchase merchandise and then resell that merchandise so they can get cash. However, debit card thieves get cash without the hassle of buying and selling merchandise. So you can see why that’s more appealing.

By choice and sometimes by necessity, American consumers are increasingly relying on debit rather than credit cards. As they use their debit cards and thieves continue to target debit card users, those consumers have a very high chance of becoming a victim.

When someone steals and uses your credit card, charges are made but no money comes out of your account. When you get the statement you can call the credit card company and report the misuse and dispute the charges. When you use a debit card, the money is immediately taken from your checking account and if you become a victim it can take as long as 30 days, and sometimes even longer for that money to get returned to you. If you have no other money source, this can cause financial hardships and havoc in your life.

Here’s what you can do to protect yourself:

The best thing you can do is always pay with cash. This alleviates all risk. The next option would be to use your credit card because you can check your statement each month and dispute charges you haven’t made. NEVER pay using your debit card. If you do, thieves can easily clean out your account because the money is taken out right away.

If you must use a debit card, then create a checking account just for debit card use and then have the majority of your money in a different checking or savings account. Just realize that any money that you have in that debit card account is at risk so only add what you are able to live without for a while if it is stolen.

Then when you use that debit card, always choose the screen prompt that identifies it as a credit card so that you do not have to type in your PIN. The purchase amount will still be immediately deducted from your bank account, but it will be processed through a credit-card network, which will give you greater protection from liability if fraud does occur.

If for some reason you need to use you PIN, always cover the keypad with your other hand and your body so that no one, including small cameras, can get your PIN.

It’s a good idea to go online and check your bank and credit card transactions weekly, however, if you won’t do that then be sure that you at least check your statements once each month to spot and report any unauthorized credit or debit transactions as quickly as possible.

If your card is lost or stolen, you’ll usually get most of your money back, but only if you report it right away. That’s why it’s important to monitor your credit card and bank accounts so that you’ll notice the problem and be able to report it right away.

If you’re going to give your card to anyone, be sure to keep an eye on what they do with it.

At restaurants, if you’re paying with a debit card and they need to take the card away from you, then go with them so that you can keep an eye on it.

Last, talk to restaurant owners and managers and encourage them to use pay at the table transaction devices where they bring the apparatus to you so that your card is never out of site.

Michael Gier is a fraud prevention expert and the host of Protect Yourself TV, an internet TV show educating people on the day to day activities that put them at risk: http://www.ProtectYourself.tv. Michael Gier is a professional public speaker available for speaking events, the co-author of “Keeping A Lock On Your Identity – How To Keep What Is Rightfully Yours,” and is available to the media for television, radio, and newspaper interviews.

If you spend any time on the Internet, you’ve probably seen ads for “free” credit scores. They usually appear alongside ads promising to make your belly fat disappear.

There are two problems with these promotions. First, you usually have to sign up for credit monitoring, identity theft protection or some other service to get your credit score. These products cost anywhere from $15 to $18 a month.

But even more troubling, these scores could give you a distorted view of your credit standing, according to a report from the Consumer Financial Protection Bureau. That’s because these credit scores usually aren’t the same scores lenders use when they consider your application for a loan, the CFPB said. Credit scores marketed to consumers who order their credit reports from AnnualCreditReport.com could also mislead consumers, the report said.

While consumers are often reminded of the importance of a good credit score, there are lots of different credit scores circulating in the marketplace. Some credit scores sold to consumers by the big three credit bureaus — TransUnion, Equifax and Experian — are “educational” scores that aren’t used by lenders, the CFPB says. The score you buy may be based on different information than the one used to consider your application for a car loan or home mortgage. Another possibility: The information used to calculate your score could change between the time you buy a score and the time you apply for a loan.

The discrepancy isn’t a problem for consumers with stellar credit, says John Ulzheimer, president of consumer education for SmartCredit.com. “If you’ve got fantastic credit, you’re going to have a fantastic score regardless of what score is being used,” he says. Similarly, if your score is abysmal, there’s not going to be much difference between the score you buy and the one lenders see.

Most consumers, though, fall between those two extremes, Ulzheimer says. Here’s how differences between the score you have and the one your lenders use could cost you money:

•If the score leads you to believe your credit is worse than it is, you could end up settling for higher interest rates than you’re eligible for, or decide not to apply for credit at all.

•If the score causes you to feel overconfident about your credit, you could waste time and money applying for loans that won’t be approved. You could even end up in worse shape, because when you apply for a loan, inquiries from creditors show up on your credit report. Multiple inquiries could dent your score.

Knowing the score

Fortunately, starting this month, millions of consumers will get a look at the credit scores lenders use. A provision of the financial reform bill that took effect Thursday requires lenders to provide you with a free copy of your credit score whenever they turn you down for a loan or approve a loan with a higher interest rate than the one offered to their best customers.

Lenders must give you the score used to make a determination on your loan, not a generic or educational version. They’re also required to explain the factors that affected your score and show where it falls on the range of possible credit scores.

This is useful information, but it won’t help consumers who want to know where they stand before they apply for a loan. How to get a more accurate idea of what your lenders will see:

•Order your free credit reports. While scores differ, they’re all based on information from your credit reports. So at the very least you should check your credit reports to make sure the information in them is accurate.

You can get an annual copy of each of your credit reports from the three credit bureaus at AnnualCreditReport.com.

Information on your credit report can affect everything from your car insurance premiums to whether you get a job. Only 38% of consumers have obtained a copy of their credit report, according to the National Bureau of Economic Research.

•If you decide to buy a score, buy a FICO score. There are lots of credit scores out there, but the FICO score is the one the vast majority of lenders use. You can purchase a FICO score based on your TransUnion and Equifax credit reports for $19.95 each at MyFICO.com.

FICO scores based on Experian credit reports are not available to consumers.

•Use free scores to give you a general idea of where you stand. Websites Credit Karma, Quizzle, Credit Sesame and Credit.com provide free, no-obligation credit profiles.

This isn’t the same as a FICO score, but you’ll get a general idea of whether you’re an excellent, average or poor credit risk.

Remember those long-standing guidelines like closing old credit card accounts, never maxing out cards and asking for lower interest rates? Well, according to MSN Money, you can forget them now.

The rules that credit card companies have to live by changed dramatically with the enactment of new regulations in 2010. Now some of the rules for consumers striving to maintain good credit are changing, too.

For the most part, cardholders would still do well to pay on time, keep their balances low and refrain from applying for too many credit cards at once. But some of the old guidelines may not always hold up, as credit card companies continue to adapt to the new environment and look for ways to run their for-profit businesses.

With the help of some easy — if often counterintuitive — steps, you can improve and retain healthy credit scores even in today’s credit environment. Here are five:

1. Open more credit cards

For years, experts warned that opening new credit cards hurts your credit score — not to mention enabling you to run up huge debts. That’s still true: The length of your credit history and new credit make up 15% and 10%, respectively, of FICO scores. But with credit issuers lowering credit limits left and right these days, having too few credit cards puts a much more important credit-score component at risk: credit utilization, or how much of your available credit you’re using. Credit utilization makes up 30% of your score.

2. Max out (some of) your credit cards

A quirk of credit score math makes it advantageous to max out certain cards. How? It’s a matter of what the issuer tells the credit bureaus.

Some types of cards don’t report credit limits to the credit bureaus. They include all charge cards from American Express and some high-end credit cards that are marketed as having no preset spending limit, such Visa Signature and MasterCard World. (These cards have credit limits, but cardholders can exceed them and must pay off the excess in full on the next bill.)

3. Don’t ask for a lower APR

In the old days, consumers were encouraged to call their credit card companies and ask for lower interest rates. “There really wasn’t a downside to doing that,” says Gerri Detweiler, an adviser with Credit.com.

“These days, if you call, you may trigger an account review.” Should that happen, and the credit issuer not like what it sees, it may cut your credit limit or actually hike your interest rate. This is where having multiple credit cards may come in handy, Detweiler says. “Don’t make that call unless you have a backup card where you could transfer that balance.”

4. Closed a card? Don’t pay it off

Under the old rules, interest-rate hikes applied to both your existing balance and future purchases. Since the Credit CARD Act went to effect, lenders have been limited to applying rate increases only on balances going forward. That said, if you closed an account before the law took effect to opt out of a rate hike – or have closed one since — you may not want to rush to pay off every last penny of the balance.

In a little-known quirk, FICO counts the credit limits of closed accounts toward utilization ratios only as long as there’s a balance on that account.

The threat of identity theft never goes away — even on vacation. This year while taking time to relax, remember to follow these identity theft tips to avoid an unpleasant surprise when you get back home.

Tip #1 — Stop Your Mail

Thieves love your mail. Finding mailboxes stuffed while homeowners are away vacationing is like a dream come true for identity thieves. With the information found in your mailbox from everything from bills to credit card offers, thieves can piece together enough info about you to steal your identity.

Your first step to avoid identity theft while you’re on vacation is to have a neighbor pick up your mail or put a ‘stop’ on it at your post office.

Tip #2 — Beware of WiFi Hotspots

Most people take along a laptop while on vacation either to spend some leisurely time surfing the net or to keep in touch with family while they’re away from home. But before you go online, you need to be aware that most WiFi hotspots are unsecured and unencrypted. This means that others can see what you’re doing online. Go online only if you’re sure your connection is protected.

Tip #3 — Choose Your ATMs Carefully

Vacationers are carefree and having fun — the way they should be. Thieves know this and take the opportunity to steal your money or identity while you’re distracted. One of the most common places they do this is at ATMs.

You’re distracted. The kids see something fun they want to do. You run to the nearest ATM to get some money. This convenient ATMs are where thieves plant skimmers that can steal your information in a matter of seconds.

To avoid this from happening, go to ATMs at banks or credit unions. These ATMs are monitored and safer than those found in shopping malls or convenience stores.

Tip #4 — Take Stock of Your Wallet

In the event that you lose your wallet or purse or is stolen, the first thing a thief is going to go for is your personal information. Before you leave home make a copy of everything you keep in your purse or wallet: credit cards, social security card, driver’s license, insurance card, etc.

This way, if you do lose your information, you know exactly what you’ve lost and can cancel all cards immediately.

Remember it’s never smart to carry your social security card in your wallet. Leave it locked up at home. If you’re traveling with a spouse, it’s best if you each have a credit card. If one card is disabled or damaged, you’ll still have access to credit.

Tip #5 — Don’t Be to Sociable

Everybody is on some social network or another these days. You might be excited about leaving for vacation, but don’t post it on Facebook, MySpace or any other networking site. Thieves troll these areas to see when people are away from home and possibly break into their home while they’re away.

Vacationing should be a fun time — not a time spent worrying about theft. By following these tips, you’ll be able to relax knowing you’ve done your best to prevent identity theft.

Part II in our “How to Manage Debt & Credit” posts: What is installment Debt? Is it good or bad?

Debt comes in many forms, and most types help us in our daily lives — when used responsibly. Most people cannot buy a home without some financial help, and many cannot buy a car (especially a new one) without some sort of financing. The money borrowed to purchase large-ticket items is called installment debt: The debtor pays a portion of the total at regular intervals over a specified period of time. At the end of that time period, the loan with interest is paid off.

Installment debt allows you to purchase items at a competitive interest rate: for example, 5% to 7% for a 30-year home mortgage and 8% or 9% for a car loan. The loan is paid back on an amortizing schedule, monthly payments of a fixed amount that remain constant over the life of the loan. At first, most of the monthly payment consists of interest. In later years, principal begins to be paid down.

Installment debt is easily budgeted and the debt is eliminated on a predetermined date. Even for those who may actually have the cash to purchase the desired item, installment debt can make financial sense if you can earn a higher return (after taxes) on your investment of cash than you must pay on your installment debt.

Having an installment loan can also help an individual establish credit. One factor considered by credit reporting agencies when calculating credit scores is how many types of debt a consumer has utilized. If a person has made timely payments on both a credit card and installment debt, he will receive a higher score than if he his only obligations have been revolving credit. While it is good to be cautious before entering into any loan agreement, an installment debt may be a good option. Handled properly, it is a way to acquire a large ticket item through budgeted payments. The lower interest rate and set term can be an attractive alternative to large credit card purchases.

Credit was once defined as “Man’s Confidence in Man.” But in fact, the definition of credit today is more like “Man’s Confidence in Himself.” Using credit today means you have confidence in your future ability to pay that debt. Forty years ago, your parents may have paid cash for their homes and their cars, a largely unheard-of event today. If they borrowed money at all, chances are it was from a relative or friend, and not a financial institution.

Today, debt and instant credit are part of our everyday lives. The convenience of instant credit, however, has taken its toll. Many individuals use credit cards to spend more than they earn, and a few of these people actually build themselves a debt prison from which some never emerge. On the other hand, those who never use credit can be denied a loan or credit when they have a justifiable need or use for it. Using credit establishes a history of financial responsibility: Until you establish a credit history, your chances of qualifying for an important loan, such as a mortgage, are greatly reduced.

What is the balance between using credit wisely and staying out of overwhelming debt? Our next posts will look at the facts and some pros and cons. Stay tuned! Subscribe to our blog to read the upcoming topics including:

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